2019 (12) TMI 470 - AT - Central Excise

Extended period of limitation - change in classification of goods when the 6 digit code was replaced by 8 digit code - allegation in SCN is that from 1/3/2005 to 31/3/2008, the assessee failed to disclose value of clearances of these disputed items in their monthly returns. The department has issued letter only on 29/4/2008 to the assessee intimating that the goods are subject to levy of central excise duty - HELD THAT - From the records, the department was well aware that the disputed goods were cleared by the assessee claiming exemption from duty by classifying them under Chapter 49. It is further stated in the letter that as per new harmonised classification which replaced 6 digit code to 8 digit code from 28.2.2005, the goods would attract duty, as the goods fall under Chapter 48. From this letter it is very much clear that the department was well aware that the appellant was clearing the goods without payment of Central Excise duty even after 28.2.2005. There are no evidence indication suppression of facts. It is a dispute of classification. There is no positive act established by the department to show that the appellant suppressed facts with intention to evade payment of duty. The period involved is also the transitional period when the 6 digit code was replaced by 8 digit code and there was a change in the classification of the disputed goods. Thus, the demand raised invoking the extended period cannot sustain - demand is set aside on ground of limitation only.

Summary

Issues:
Classification of goods under Central Excise Tariff Act, 1985; Demand of duty on paper tags and trays; Limitation period for raising duty demand.

Classification Issue:
The appellant, engaged in the manufacture of Paper and Printing Industry products, cleared goods without paying Central Excise duty, claiming they were non-excisable. The department observed certain items as excisable goods post the introduction of the new 8-digit Tariff Act. The original authority confirmed the classification of wrappers and trays under Chapter 48 and paper tags under 48211010, upholding duty demand on the latter two. The Commissioner (Appeals) set aside duty on printed wrappers but upheld it on paper tags and trays, finding against the appellant on limitation. The appellant contested the duty demand invoking the extended limitation period, arguing the goods were not leviable before the new Tariff introduction. The department's letter to the appellant acknowledged the goods were cleared without duty payment post the Tariff change. The appellant's reply and subsequent show cause notice did not establish suppression of facts to evade duty. The Tribunal held the demand invoking the extended period lacked merit due to the transitional Tariff change and absence of evidence supporting suppression, setting it aside.

Limitation Issue:
The Tribunal primarily focused on the limitation aspect, noting the absence of evidence showing intentional suppression by the appellant to evade duty payment. The department's delayed show cause notice, issued after the appellant's detailed response to the classification change, did not establish any deliberate concealment of facts. Given the transitional period with Tariff changes and the department's knowledge of the appellant's duty payment status post the new Tariff introduction, the demand raised invoking the extended period was deemed unsustainable and subsequently set aside.

Conclusion:
The Tribunal partially allowed the appeal filed by the appellant on the limitation ground, setting aside the duty demand. The appeal filed by the Revenue was dismissed due to monetary limits. The decision highlighted the importance of evidence in establishing intentional suppression of facts for duty evasion and considered the transitional Tariff change period in assessing the duty demand validity.